Banks and NBFCs endow data to the credit bureaus on a periodic basis to compute the credit score showing your credibility for availing the credit like credit cards or loans. Credit score equaling 750 and above is usually looked upon as good for availing credit by all 4 bureaus i.e., CIBIL, Experian, Equifax and CRIF Highmark. A strong score shows your responsible credit behaviour as an applicant for credit. Read on to understand the benefits of holding a good credit score.
So, note that whether you are applying for an ICICI or Axis bank, ICICI CIBIL score check-up and Axis bank CIBIL score check-up, both are crucial for the lenders to determine your credibility or creditworthiness before approving the credit application. Note that, the same is applicable to other lenders too.
What are the benefits of holding a good credit score?
While your score is not the only factor that lenders factor in when assessing your credit card and loan application, the following are a few of the key advantages commonly linked with a strong credit score –
-
Higher approval chances –
A high score indicates your responsible credit behaviour, a lower default risk, and a clean repayment history to the lender, which typically increases your chances of getting approval for a credit card or loan application.
-
Lower rate of interest –
In case you hold a strong score, lenders may offer you a comparatively lower interest rate for availing credit such as a home loan, personal loan, or credit card.
-
Enhanced access to pre-approved loans –
A high score even has the potential of enhancing your chances of accessing a preapproved loan or a credit card deal. Such offers can endow you with instant access to credit because they generally include minimal documentation requirements and shorter approval time.
-
Easier accessibility to premium credit cards –
Before a bank issuer approve your application for a credit card, one of the initial factors that the lender factors in is your score. This is because by checking your score, the issuer understands your repayment potential, your potential of using the credit card responsibly and not defaulting, etc. Showing good and healthy credit behaviour is the key to getting instant approval for credit cards.
-
Approval for a higher credit card limit or loan amount –
A high score can even enhance your chances of getting approved for credit card limits. Also, you may get higher limit approval on your loan overdraft if you hold a good score. This is owing to the fact that a higher credit score generally represents a lower default risk due to your disciplined credit behaviour.
-
Possibility of longer repayment tenure approval –
A higher repayment tenure generally includes a higher level of risk for lenders. However, a strong score might assist you to avail a higher repayment tenure on your loan in comparison if you had a lower credit score. When a loan is paid back over a long time period, it leads to smaller loan EMIs, lower monthly loan burden and might assist you to manage your expenses well.
Also Check: SBI CIBIL Score
What are the important ways to ameliorate your credit score? Read on to understand.
Your score is basically the numerical representation of your credit report. There are distinct parameters that make up your credit score. These parameters include your mix of credit, repayment history, age of credit history, credit utilisation ratio, etc. Following are the known ways through which you can ameliorate your score –
-
Maintain a good and clean repayment history –
Repay your credit card outstanding bills and loan EMIs in totality and on time. Missed or late payments can aggressively impact your credit score. Ensuring timely debt repayments over a longer time period positively affects your score as it shows your disciplined credit behaviour.
-
Maintain a low CUR (credit utilisation ratio) –
The credit utilisation ratio refers to the credit ratio used on the overall available credit card limit. This shows the extent of your credit dependence. Maintaining a low CUR (credit utilisation ratio) of 30 per cent or lower shows reduced dependency on credit and a lower repayment burden as well as higher credibility. This in turn positively affects your score and enhances your chances of receiving additional credit.
-
Check your credit report for any mistakes or errors –
Periodically checking your report for administering the mistakes and errors on it is very important. If ever you face any error or mistake, you must ensure to instantly report to the concerned authority for quick rectification. Doing so would instantly enhance your fallen credit score.
-
Avoid submitting multiple loan applications or inquiries –
You must avoid making multiple loan applications as well as inquiries with various lenders simultaneously. It shows you as a credit-hungry individual and even enhances the number of direct and hard inquiries on your report, which negatively impacts your credit score.
-
Enhance your credit card limit –
Asking credit card issuers to enhance your credit card limit on your credit card might have a good and positive impact on your score. A higher limit can assist you to lower the credit utilisation ratio as the available limit enhances as long as the usage stays at a similar level. You can reach out to your credit card issuer or check-up for an option to increase your credit card limit via phone banking or net banking.
-
Avoiding settling debts –
You always must pay off your dues in totality and go for the settlement option as the last and only resort. While settling your debt might lower your debt burden, it shows your inability to make debt repayment, which negatively affects your score as well as your future credit approval chances.
Ending note
You can form as well as maintain a strong score over a time period. All you require doing is remain focused on maintaining strong credit behaviour. Doing so would allow you to qualify for credit as it would not assist you to get credit approval, but even assist you to get rewarded for good credit behaviour in form of pre-approved loan offers, lower interest rates, lower or nil processing charges, premium credit card approval, etc.
Read more interesting articles at experiencerole